With basis risk and unbiased futures markets, the optimal hedge with credit derivatives is a fixed proportion

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With basis risk and unbiased futures markets, the optimal hedge with credit derivatives is a fixed proportion of the exposure. Discuss why this result is important for risk management in banking and finance.

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Investment Risk Management

ISBN: 9780199331963

1st Edition

Authors: H. Kent Baker, Greg Filbeck

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Question Posted: Dec 07, 2023 03:47 AM

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With basis risk and unbiased futures markets, the optimal hedge with credit derivatives is a fixed proportion

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This result holds for all riskaverse financial and nonfin...View the full answer

Investment Risk Management

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